Islamic Microfinance research study initiated in Yemen

AlHuda Center of Islamic banking and economics (CIBE) Initiated a Islamic Microfinance research study for Yemen Microfinance Network (YMN) in Yemen.

This study will be conducted in the Yemen's capital Sana'a including Taiz, Adan and Almoukla, so that the Islamic Microfinance products can be examined broadly and further Islamic Microfinance products can be developed for Yemen Microfinance sector with the compatibility of existing structure. Consequently, maximum people utilize the Microfinance facility and the alleviation of poverty would be assured. 

Najah Al-Mugahed Managing Director of Yemen Microfinance Network explained the association memorandum of research study that Microfinance market size in Yemen is more than one million but only 80,000 (eighty thousand) people are barely facilitating with the services and products of Microfinance which is approximately 8% of the total Microfinance market size. Its major reasons are; Non-existence of complete Islamic Microfinance range of products, Domination of Murabaha in Islamic Microfinance sector, increasing rate of Murabaha and percentage of interest in Microfinance are the obstacles in the expansion of Microfinance industry. An appropriate implementation plan would be prepared through this research study to strengthen the Yemen's Microfinance sector.

Muhammad Saleh Al-Lai Chairman of Yemen Microfinance Network and Executive Director of Alamal Microfinance Bank proclaimed that Yemen's Islamic Microfinance market is very promising and we want to make it stronger through this study so that Yemen could get a distinguished level through Islamic Microfinance. He further mentioned that this is our privileged that Al-amal Microfinance Bank won the award of Islamic Microfinance Challenge 2010 which was organized by Islamic Development Bank and CGAP (World Bank) which shows a clear understanding of our strong structure of Islamic Microfinance.

Muhammad Zubair Mughal Chief Executive Officer of Alhuda Center Islamic Banking and Economics (CIBE) said that our selection for the research study is a great honor for AlHuda CIBE. He mentioned that they have developed a strong research methodology for this study and used different research instruments e.g surveys, focus group discussion (FGDs), stake holder's interviews, desk review of MFI's and meetings with prestigious professionals of Microfinance industry to get primary & secondary information etc which will help to design the ideal products for Yemen Islamic Microfinance sector.

He further mentioned that the share of Islamic Microfinance in Yemen's Microfinance sector is approximately 90% and remaining 10% are also converting their portfolio into Islamic Microfinance, Yemen Microfinance Industry will be further strengthened with the development of new Islamic Microfinance products, It will increase the outreach of Microfinance sector and help out to eradicate poverty.

(Ame.Info.Com / 21 May 2013)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Islamic Microfinance indispensable for poverty alleviation

Lahore—UNDP in collaboration with USAID and CGAP jointly organized Iraq Microfinance Policy Forum” on April 10 & 11, 2012 in Erbil-Iraq, for setting up Policy Goals for Microfinance in Iraq, which was participated by high Government functionaries from Iraq Government, including Advisors to Prime Minister, Central Bank in Iraq, USAID, ILO, UNOPS, CGAP, UNHABITAT representatives. Representatives from Yemen, Jordan, India, Italy, Poland, UAE, Syria and many other many Countries also participated in this Conference. Muhammad Zubair Mughal – Chief Executive Officer of AlHuda Centre of Islamic Banking and Economics (AlHuda-CIBE) presented his paper on “Microfinance Policy in Asia and the increasing trend of Islamic Microfinance” which was appreciated by many experts present at the Forum.

Zubair Mughal presented a detailed analysis of poverty in 52 Asian countries with their techniques and strategies in Poverty alleviation, legal and regulatory reforms, Minimum Investable Funds limits, Interest rates and other improvements efforts in Microfinance sectors. While declaring thePoverty analysis of these countries, In-spite of having Oil and other minerals these countries are having 22.9% in Iraq, 18% in Iran, 34.8% in Yemen, 13.3% in Jordan, 12.5% in UAE, 28% in Lebanon and 11.9% people in Syria are living below the poverty line. Even more worrying point is that 96% of the population in these countries is Muslims and the cause being that they avoid the conventional system of Microfinance as it is based on ‘Riba’ (theInterest). So the only solution to alleviate poverty in these countries is to adopt for Islamic Microfinance system. These countries can only brought to development by adopting the Islamic Microfinance following the Islamic Shariah. Yemen Iraq and Syria have already undertaken a start and this will create room for more Islamic Microfinance Institutions to be setup in these countries.

He further emphasized the need for Islamic Microfinance through the research and surveys conducted by IFC, CGAP, USAID, Frankfurt School and FINCA wherein it is proved that the Muslim population in these countries prefer Shariah compliant ways instead of Conventional System of Microfinance.

(Pakistan Observer / 10 April 2012)

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Alfalah Consulting - Kuala Lumpur:
www.alfalahconsulting.com
Islamic Investment Malaysia:
www.islamic-invest-malaysia.com

Islamic Microfinance: A Model for Alleviating Poverty

Islamic microfinance is becoming an increasingly popular mechanism for alleviating poverty, especially in developing countries around the world. The Islamic finance industry as a whole is expected to reach over $2 billion dollars in 2012 and is a continually growing sector due to its ethical principles and prohibition of riba (interest).

The concept of Islamic microfinance adheres to the principles of Islam and is a form of socially responsible investing. Investors who use their wealth for Islamic microfinance projects only involve themselves in halal projects which benefit the community at large. Such projects include zakat, which is charity based, or trade and industry projects to develop a country's economy.

The mechanism of lending in Islamic microfinance differs from conventional microfinance due to the prohibition of riba. Unlike conventional microfinance, Islamic microfinance offers an interest-free way to give small loans to people who are poor and in need. One key method of lending is through the Islamic financial instrument, qard'l-hasan, which is a loan that has been extended by the lender on a goodwill basis and the borrower is only required to pay the exact amount borrowed without additional charges or interest. The Quran clearly encourages Muslims to provide qard'l-hasan, or benevolent loans, to “those who need them”:

“Who is he that will give Allāh qard'l-hasan? For Allāh will increase it manifold to his credit.” (57:11) “If you give Allāh qard al hasan… He will grant you forgiveness.” (64:17)

At a time when poverty is still prevalent around the world, there is no better solution than opting for funding which can provide benefits to a poverty-stricken community and help to rebuild economies.

Islamic microfinance gives the investor a chance to get involved in worthwhile projects which could essentially play a significant role in targeting poverty and alleviating it in many countries around the world. Islamic microfinance primarily relies upon the provision of financial services to the poor or developing regions which are subject to certain conditions laid down by Islamic jurisprudence. It represents the merging of two growing sectors: microfinance and the Islamic finance industry.

It has the potential to not only be the solution for an increased demand to help the poor  but also to combine the Islamic socially responsible principles of caring for the less fortunate with microfinance's ability to provide financial access to the poor.

Unleashing this potential could be the key to providing financial stability to millions of less privileged people who currently reject microfinance products that do not comply with Islamic law.

Many regions around the world have already created tailor-made Islamic microfinance programs, either through Islamic banks or Islamic microfinance institutions to cater for dealing with poverty.

Abdul Latif Jameel Company Community Service Programmes (ALJCSP) in the Middle East has utilized Islamic microfinance applications such as qard'l-hasan in order to provide financial support and empower low income women in the UAE so that they can endeavor to improve their standard of living.

Zubair Mughal, Chief Executive Officer, AlHuda Centre of Islamic Banking, said in a statement that, “In the wake of the current financial crisis all around the globe, Islamic microfinance has gained even more importance due to its transparency and sustainability. Islamic microfinance becomes an effective tool for poverty alleviation.” (Micro Finance Africa).

Utilizing Islamic financial instruments such as Murabahah and Musharaka to help in facilitating Islamic microfinance can not only spur the Islamic microfinancial sector but can also increase the options of Islamic finance and make it more accessible to poverty stricken countries.

While poverty in the Muslim world is widespread, Somalia is shouldering more than its fair share of the crisis. The famine which hit Somalia in July 2011 resulted in the worst food crisis that Africa has faced since 20 years. The United Nations had confirmed that famine does exist in two regions of southern Somalia, Southern Bakool and Lower Shabelle. Across the country, nearly half of the Somali population, which is currently 3.7 million people, is now experiencing a crisis of food, poverty, shelter and malnutrition.

However, if the population of Somalia had more access to financial services then they would be able to develop their economy and get it back on track. Unfortunately, the options of financial services for alleviating poverty in East Africa are either inadequate or exclusive.

Islamic microfinance has been an unprecedented way to combat poverty which may also provide the affected people of Somalia with a form of economic relief and provide a financial solution to developing countries worldwide.

(MuslimMatters, by Tasnim Nazeer, 21Feb2012)

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Alfalah Consulting - Kuala Lumpur:
www.alfalahconsulting.com
Islamic Investment Malaysia:
www.islamic-invest-malaysia.com